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NMIMS Global Access
School for Continuing Education NGA-SCE
Course: Strategic Financial Management
Internal Assignment Applicable for December 2015 Examination
Assignment Marks: 30
Instructions:
All Questions carry equal marks.
All Questions are compulsory
Answers to each assignment question to be explained in approximately 1500 words.
Use relevant examples, illustrations as far as possible.
All answers to be written individually. Discussion and group work is not permissible.
Students are free to refer to any books/reference material/website/internet for
attempting their assignments, but are not allowed to copy the matter as it is from the
source of reference.
Students should write the assignment in their own words. Copying of assignments
from other students is not allowed.
1. a) A company’s EBIT is Rs.75000. The company has debt of Rs 300000 and cost of
debt is 10%. The cost of equity is 12%. Calculate the overall cost of capital and the
value of the firm using NI approach.
( 7.5 marks)
b) If debt increases in capital structure by Rs.100000, calculate the overall cost of
capital and also the value of the firm using NI approach.
(7.5 marks)
2. XYZ limited provided following data:
o 9% debentures of face value of Rs. 1,000 Redeemable at par after 8 years
Page 2
o Tax rate is 40%
o Floatation cost is 4%
Determine cost of debt in following situations:
(i) Debt issued at par
(ii) Debt issued at 9% discount
(iii) Debt issued at 9% premium
(15 marks)
***************
Page 1
NMIMS Global Access
School for Continuing Education NGA-SCE
Course: Strategic Financial Management
Internal Assignment Applicable for December 2015 Examination
Assignment Marks: 30
Instructions:
All Questions carry equal marks.
All Questions are compulsory
Answers to each assignment question to be explained in approximately 1500 words.
Use relevant examples, illustrations as far as possible.
All answers to be written individually. Discussion and group work is not permissible.
Students are free to refer to any books/reference material/website/internet for
attempting their assignments, but are not allowed to copy the matter as it is from the
source of reference.
Students should write the assignment in their own words. Copying of assignments
from other students is not allowed.
1. a) A company’s EBIT is Rs.75000. The company has debt of Rs 300000 and cost of
debt is 10%. The cost of equity is 12%. Calculate the overall cost of capital and the
value of the firm using NI approach.
( 7.5 marks)
b) If debt increases in capital structure by Rs.100000, calculate the overall cost of
capital and also the value of the firm using NI approach.
(7.5 marks)
2. XYZ limited provided following data:
o 9% debentures of face value of Rs. 1,000 Redeemable at par after 8 years
Page 2
o Tax rate is 40%
o Floatation cost is 4%
Determine cost of debt in following situations:
(i) Debt issued at par
(ii) Debt issued at 9% discount
(iii) Debt issued at 9% premium
(15 marks)
***************
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